Blog

INTRODUCTION

“You can bomb the world into pieces, but you can’t bomb it into peace.”
– Michael Franti

War is always a tragedy, resulting in the loss of innocent lives and immeasurable suffering.  In this letter we focus on the economic impacts of the war.  We do not intend to downplay the human toll, but to focus on what we know best.  We hope that a long-lasting, peaceful resolution is reached in an expeditious manner.

The economy entered 2026 with the wind at its back, and stock valuations reflected this positive backdrop.  In our Q4 2025 letter, we instructed investors not to be complacent, extrapolating the strong returns of the prior two years forward.  While we had no idea that the U.S. and Israel would attack Iran, we knew that a forward price-to-earnings multiple of 22-23 on the S&P 500 was historically high, leaving the market exposed to bad news.

INTRODUCTION

“October. This is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August, and February.”                                                                           – Mark Twain

Over the years, we’ve often discussed one of the most consistent challenges investors face: the difficulty of timing the market. Too often, investors buy near the highs when optimism is strongest and sell near the lows when fear is most intense. While the reasons are many, the root cause is usually human nature—our instincts are wired for survival, not successful investing.